Detailed Narrative
Q1 FY26 Performance Overview
Tata Power reported a strong Q1 FY26, with all business segments performing well. The generation, transmission, and distribution businesses maintained steady performance, meeting yearly and quarterly targets. The company's balance sheet remained robust despite a CAPEX spend of ₹3,700 crores in the quarter. Net debt increased by ₹2,900 crores to ₹47,578 crores, with leverage ratios of Net Debt to Underlying EBITDA at 2.93 and Net Debt to Equity at 1.08, which management considers among the best in the industry.
Mundra Plant and Section 11 Status
The Section-11 directive, which allowed the Mundra plant to operate, expired on June 30, 2025. The company is in detailed discussions with the five procurer states to finalize a new arrangement for power supply, expected to conclude within August. The plant is currently undergoing maintenance shutdowns, including work related to FGD, and will resume continuous operation of all five units once the Supplementary PPA (SPPA) is finalized. Management believes the current lower international coal prices make Mundra's power very attractive in the merit order.
Renewable Energy Business Growth
The renewable business demonstrated strong growth, commissioning a record 652 MW in the EPC segment during Q1 FY26, nearly double the capacity commissioned in the same quarter last year. Of this, 560 MW was for third-party projects and 92 MW for own utility scale. The company expects to commission approximately 1,600 MW of own utility scale projects in the next three quarters. The total pipeline for own projects, including pumped hydro and Bhutan hydro, stands at 8.2 GW, with plans to increase Bhutan hydro capacity to nearly 5 GW in the coming years.
Distribution Business Performance
The distribution business, particularly in Odisha, showed significant improvement. Challenges related to billing issues and 'ghost customers' have been addressed, leading to better performance. The company aims to reduce AT&C losses from the current 17%-18% range to about 10% within the next three years. Collection efficiency has also improved, often reaching 100%. In Mumbai, substantial CAPEX of ₹600-700 crores annually is being made for transmission projects to meet increasing demand.
Manufacturing and Rooftop Solar Business
The manufacturing plant has stabilized, producing approximately 950 MW of modules and 900 MW of cells, with expectations for higher yields and efficiency in the current quarter. The rooftop business performed exceptionally well, with units supplied in June reaching 20,000, up from 1,000 units in March last year. The company targets supplying 40,000-50,000 units per month by the later part of this year, driven by strong demand and the PM Surya Ghar scheme. Effective June 1, 2026, all projects will require DCR (Domestic Content Requirement) cells and modules.
Project Pipeline and Future Outlook
Tata Power is actively pursuing a substantial project pipeline, including 5.5 GW of renewable projects and 2.8 GW of pumped hydro projects. Work has already commenced on 1 GW of pumped hydro, with another 1.8 GW expected to start in the next nine months. The Bhivpuri pumped hydro project is slated for commissioning by 2028-29, and the Bhutan hydro project by 2029. The company is also keen on participating in the UP Discom privatization, with bid documents expected soon.